JULIA Gillard’s frontbench has hit the panic button over the carbon tax with senior ministers warning it is “killing” the government, and others touting Greg Combet as a leadership option.

Divisions have erupted over the sales pitch and design of the tax, with some demanding the Prime Minister accelerate the planned move from a fixed to a floating carbon price, or boost planned compensation for struggling families.

Julia Gillard is standing firm but her frontbench are in despair. “The carbon tax is killing us,” a senior minister told The Sunday Telegraph.

Pretend for a moment that we wanted to forcibly reduce the production of carbon dioxide by Australians.

There are three ways to do it.

The first option is to levy a tax on every tonne of carbon dioxide produced. This assumes that if you tax something, less of it will be produced. This is phase 1 of the Gillard/Greens scheme. Tax payers rate this the “least worst” scheme because it is simple, easily demonised and easily abolished once it becomes obvious that it is achieving no climate benefits at great cost.

Australian Prime Minister, Julia Gillard has announced she will be repealing Australia’s $23 per tonne Carbon Tax, which was due to be implemented on 1 July 2012.

She said it was embarrassing trying to defend her climate change advisors whose predictions kept failing. “It’s one thing when experts make predictions and they are slightly wrong,” she said “but when the complete opposite happens, then there is something drastically wrong. It’s clear to me now that the sun drives climate change. The Carbon Tax will therefore not be implemented on 1 July.”

“All funds to man-made climate change research will be stopped with immediate effect” she said “instead, the millions of dollars will be put into cancer research. With this massive increase in funding to cancer research, we expect to find a cure for cancer within the next 5 years.”